Renters Reform Bill - a lettings expert’s take

Section 21: Research carried out by Leaders Romans Group has found that Section 21 is rarely overused, and even more rarely misused. LRG surveyed landlords across its estate agency brands and found that 80% of landlords have never used Section 21. Of those that had, 63% did so because the tenant was in breach of the lease, and 38% used a ‘no fault’ eviction.

LRG, along with the majority of our landlords, is committed to raising standards. But while we are fully supportive of ‘professionalising’ the private rented sector, many of the proposed changes, including the repeal of Section 21, would pose new challenges to some landlords in some situations and could penalise both landlords and tenants.

It is important to bear in mind that private landlords are vital to meeting increased demand in the rental sector and that unnecessary measures which could result in an exodus of landlords from the market would be detrimental to rental affordability.

End to fixed-term contracts: The suggestion that tenants should be permitted to serve just notice of two months at any point would create considerable uncertainty for landlords, which is unwelcome in an already challenging market. There has been a request to amend this, so that two months’ notice is only permissible when the tenant had been in the property for at least four months. This compromise would provide some further security for landlords, while allowing flexibility for tenants.

Landlords’ register: The principal intention of this is good if it assists with filtering out rogue landlords and gives prospective tenants access to more information to help make informed decisions.

Doubling of notice periods for rent increases: Investment in buy to let is not just about capital return, but monthly rental yield. It is important that landlords can continue to increase their rents in line with market conditions and also in line with ongoing improvements they may make to their properties.  The reality is that rent increases only take place one a year anyway and mostly in conjunction with a renewal where negotiations tend to start two or three months in advance.

No blanket bans on benefit claimants or families with children: Discrimination against tenants in receipt of Housing Benefit is wrong, and LRG does not endorse it. Already we are proactive in training of staff to ensure they can accommodate these requests and to educate landlords is regular and monitored.

Landlords would have to consider pets: This again has already been considered and in most cases, where a property is suitable for pets, measures are in place to accommodate them. This includes clauses around professional cleaning and disinfestation at the end of tenancies.

Taking on an investment property, or expanding an investment portfolio, is invariably a good financial decision. In the current market, there are two particularly good reasons to invest in rental property. The first is the significant shortage of rental stock: rents have been rising very well over the past couple of years, for the simple reason that there is a huge amount of demand from tenants and simply not enough available accommodation. This competition for new lets has pushed prices up, as many tenants have been prepared to pay over the advertised rental amount to secure a decent home.

The second is that if property prices fall, it’s a great time to pick up a bargain. There will increasingly be sellers who are struggling to pay higher mortgage rates, along with the usual reasons for selling. If you can offer them a quick deal, that gives you some bargaining power to negotiate a reduction in price. And whatever discount you manage to get translates to instant equity in the property and can improve the property’s income returns too.

It is important that landlords get good advice on how the changing legislation and regulations will affect them. They should also research supply and demand in their own areas, to make sure that the properties that they buy will not only let well in the current market, but into the future. Tenants can vary enormously from one part of a town or city to another, so work with local experts to ensure your purchase has good long-term prospects.

A property investment is for the long term. It is one which will see many economic cycles and changes of Government, but despite interest rates rising and falling and regulations coming and going, a BTL investment will invariably deliver a good financial return.

However, the Government must realise that the housing crisis – specifically the under-supply of rental units - cannot be resolved by penalising the already stretched private rented sector.

* Allison Thompson is National Lettings Managing Director at Leaders Romans Group *

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